A Guide to Connecticut Secure Choice Savings Plan

The road to retirement may be challenging for those who live in Connecticut. A new report says the state is the least affordable to retire, after Hawaii and California, respectively. And more than 600,000 employees in Connecticut don't have an employer-sponsored retirement savings plan.

This issue isn't specific to the state of Connecticut — nationally, as many as 41 million U.S. workers don't have an employer-sponsored retirement savings plan, and 50% of women, ages 55 to 66, and 47% of men of the same age group don't have personal retirement savings.

To address this problem, several states — including Connecticut — have introduced mandated retirement programs requiring employers to offer retirement benefits. In this post, we'll break down everything you need to know about Connecticut's mandated program, MyCTSavings, including:

What your business needs to do to comply
How much the program costs
Affordable alternatives to consider

How does MyCTSavings work?

MyCTSavings uses automatic enrollment and deducts employees' contributions via payroll, which are contributed to a Roth Individual Retirement Account (IRA) after taxes have been deducted from the worker's paycheck.

To be eligible, employees must:

Be age 19 or older;
Work within the state of Connecticut;
Have been employed for at least 120 days; and
Have earned more than $5,000 in a calendar year.

The default savings rate for a MyCTSavings account is 3% of an employee's gross pay, and employees can change the savings rate to higher or lower by 1% at any time. Eligible employees can opt out of MyCTSavings if they don't want the plan or prefer to save for retirement another way.

What responsibilities do I have as an employer with MyCTSavings?

Employers don't administer or sponsor the MyCTSavings plan; they don't have any control over the operations or investments of the plan, and they don't have any liability for the investments. Their role is only to facilitate the program.

Employers provide the state's program with their EIN, access code, and a list of their employees and payroll information. Then 30 days later, employers must update participating employees' contribution rates within their payroll. After that, employers must keep employees' payroll contributions and staff list current for the state's program.

Is the Connecticut state retirement program mandatory?

Yes. All employers in the state with at least five eligible must implement the MyCTSavings plan unless they offer a qualified, employer-sponsored retirement plan, like a 401(k). The program is estimated to affect about 30,000 Connecticut employers.

How do I opt out of MyCTSavings?

If you want to opt out of the program to offer your own retirement plan, you can certify your exemption online or call 833-811-7436.

What are the deadlines for MyCTSavings?

MyCTSavings has three waves of enrollment and rolling registration deadlines and is now open. For the most up-to-date deadline information, check MyCTSavings.

What are the consequences of not complying?

Any business that doesn't register or falls out of compliance may face an investigation and penalties. Further, failure to remit deductions promptly violates Connecticut law, and the state may impose penalties for these violations.

Does MyCTSavings have fees?

Employees pay fees to participate in the program, including an annual asset-based fee that's computed daily and is a percentage of the money in their account. This fee is about $0.25 for every $100 saved. Employees also pay $26 annually to cover program, administration fees, and operating expenses. Learn more about their fees here. For employers, MyCTSavings is free to facilitate.

What are the alternatives to the program?

While MyCTSavings may be a great fit for many employers, others may opt for a program with more flexibility, like a 401(k).

Unlike the mandated program, with a Guideline 401(k), employers can contribute to their employees' retirement savings. A 401(k) also boasts significantly higher contribution limits, meaning employees can save more. Guideline also automates plan administration, including recordkeeping, custodial services¹, compliance testing², and guided employee onboarding.

As more states begin to mandate retirement savings plans, we're committed to helping employers understand how to comply. Stay up to date on the latest news on our blog. And if you're an employer looking for an easy, affordable alternative to MyCTSavings, here's how to get started with a Guideline 401(k).

Disclosures:

The information provided herein is general in nature and is for informational purposes only. It should not be used as a substitute for specific tax, legal and/or financial advice that considers all relevant facts and circumstances. Deadlines, fees, and other program details are subject to change by the state without notice and should be checked prior to making any decisions.

Information as of December 13, 2022. Fees will vary based on the program and based on the funds chosen for investment. Fees are subject to change by the state without notice and should be checked prior to making any decision. Visit the myCTsavings’ site to learn more.

¹ All plans of related entities must be administered by Guideline in order to provide compliance testing.

² Guideline's 3(16) fiduciary services are only available to clients who utilize an eligible payroll provider.